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Of the following investments, which can be said to have the greatest liquidity?(1 point)

Responses

A $250,000
investment in real estate earns $10,000
every year. The asset can be sold for cash after 3 months of offering the asset for sale.
A 250,000 dollars investment in real estate earns 10,000 dollars every year. The asset can be sold for cash after 3 months of offering the asset for sale.

A $1,000
investment in stocks earns $100
every year. The stocks can be sold within 24 hours.
A 1,000 dollars investment in stocks earns 100 dollars every year. The stocks can be sold within 24 hours.

A $500
investment to open a certificate of deposit earns $5
after 6 months. Funds are withdrawn at the end of the 6-month period.
A 500 dollars investment to open a certificate of deposit earns 5 dollars after 6 months. Funds are withdrawn at the end of the 6-month period.

A $500
investment in a savings account earns $2
every year. Funds are withdrawn with notice given 30 days in advance.

1 answer

To determine which investment has the greatest liquidity, we need to consider how quickly and easily each investment can be converted to cash.

  1. Real Estate Investment: Although it earns $10,000 per year and can be sold for cash after 3 months, it is not highly liquid due to the time it takes to sell (3 months).

  2. Stocks Investment: The $1,000 investment in stocks, which can be sold within 24 hours, provides high liquidity because it can be converted to cash very quickly.

  3. Certificate of Deposit (CD): The $500 investment in a CD earns $5 after 6 months, and funds are only available at the end of that period, giving it low liquidity.

  4. Savings Account: The $500 investment in a savings account earns $2 every year, but requires a 30 days' notice to withdraw funds, also indicating lower liquidity.

Conclusion: The investment that has the greatest liquidity among the options provided is the $1,000 investment in stocks, as it can be sold and converted to cash within 24 hours.